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Exhibit Index on Page 2
FORM 11-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Annual Report Pursuant to Section 15(d) of the Securities Exchange Act
of 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED].
For the fiscal year ended: December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED].
For the transition period from to
Commission file number 1- 3208
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
National Linen Service Retirement and 401(k)
Plan for Eligible Management Associates
B. Name of issuer of the securities held pursuant to the plan and
the address of the principal executive office:
National Service Industries, Inc.
1420 Peachtree Street, NE
Atlanta, Georgia 30309
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REQUIRED INFORMATION
The following documents are filed as a part of this report:
1. Financial Statements
Plan financial statements prepared in accordance with
the financial reporting requirements of ERISA include the following:
Report of Independent Public Accountants
Statements of Net Assets Available for Benefits as of December
31, 1995 and 1994
Statement of Changes in Net Assets Available for Benefits, with Fund
Information, for the Year Ended December 31, 1995
Notes to Financial Statements
2. Exhibits
Sequentially
Numbered
The following exhibit is filed with this report: Page
23 Consent of Arthur Andersen LLP 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf
by the undersigned hereunto duly authorized.
National Linen Service Retirement and 401(k)
Plan for Eligible Management Associates
Date: June 28, 1996 By: National Service Industries, Inc.
Plan Administrator
By: /s/ James S. Balloun
Name: James S. Balloun
Title: Chairman and Chief Executive Officer
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of
National Linen Service Retirement
and 401(k) Plan for
Eligible Management Associates:
We have audited the accompanying statements of net assets available for benefits
of the NATIONAL LINEN SERVICE RETIREMENT AND 401(k) PLAN FOR ELIGIBLE MANAGEMENT
ASSOCIATES as of December 31, 1995 and 1994 and the related statement of changes
in net assets available for benefits, with fund information, for the year ended
December 31, 1995. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1995 and 1994 and the changes in net assets available for benefits
for the year ended December 31, 1995 in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The fund information in the statement of
changes in net assets available for benefits is presented for the purpose of
additional analysis rather than to present the changes in net assets available
for benefits of each fund. The fund information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
Atlanta, Georgia
May 31, 1996
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NATIONAL LINEN SERVICE RETIREMENT
AND 401(k) PLAN FOR ELIGIBLE MANAGEMENT ASSOCIATES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1995 AND 1994
1995 1994
CONTRIBUTIONS RECEIVABLE:
Employer ......................................... $ 0 $ 2,896
Participant ...................................... 0 89,471
Total contributions receivable .............. 0 92,367
INVESTMENT IN NSI DC TRUST, at fair value (Note 2):
Diversified Equity Fund .......................... 1,083,683 369,034
Balanced Fund .................................... 866,002 316,290
NSI Stock Fund ................................... 599,009 165,790
Stable Value Fund ................................ 512,106 275,350
Loan Fund ........................................ 40,649 1,000
International Fund ............................... 2,295 0
Total investments ...................... 3,103,744 1,127,464
NET ASSETS AVAILABLE FOR BENEFITS .................... $3,103,744 $1,219,831
The accompanying notes are an integral part of these statements.
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NATIONAL LINEN SERVICE RETIREMENT
AND 401(k) PLAN FOR ELIGIBLE MANAGEMENT ASSOCIATES
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION,
FOR THE YEAR ENDED DECEMBER 31, 1995
NonParticipant-
------------------------Participant-Directed--------------------- Directed
Diversified Stable NSI NSI
Balanced Equity Value Stock Loan Internat'l Stock
Fund Fund Fund Fund Fund Fund Fund Total
CONTRIBUTIONS:
Employer ......................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 225,914 $ 225,914
Participant ...................... 420,239 526,292 204,233 87,731 0 1,336 0 1,239,831
Total contributions ........... 420,239 526,292 204,233 87,731 0 1,336 225,914 1,465,745
NET GAIN FROM INVESTMENT
IN NSI DC TRUST ..................... 172,041 229,427 7,385 31,803 1,021 87 73,754 515,518
BENEFITS PAID TO PARTICIPANTS ....... (51,220) (63,159) (10,096) (15,194) (9,420) 0 (17,981) (167,070)
INTRAPLAN TRANSFERS ................. (27,529) (19,145) (4,668) 2,422 48,048 872 0 0
OTHER ............................... 5,886 6,375 22,126 10,847 0 0 24,486 69,720
NET INCREASE ........................ 519,417 679,790 218,980 117,609 39,649 2,295 306,173 1,883,913
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1994 ................... 346,585 403,893 293,126 46,481 1,000 0 128,746 1,219,831
NET ASSETS AVAILABLE FOR BENEFITS,
December 31, 1995 ................... $ 866,002 $ 1,083,683 $ 512,106 $ 164,090 $ 40,649 $2,295 $ 434,919 $ 3,103,744
The accompanying notes are an integral part of this statement.
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NATIONAL LINEN SERVICE RETIREMENT
AND 401(k) PLAN FOR ELIGIBLE MANAGEMENT ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
1. PLAN DESCRIPTION
The following brief description of the National Linen Service Retirement
and 401(k) Plan for Eligible Management Associates (the "Plan") of National
Linen Service (the "Company"), a division of National Service Industries,
Inc. ("NSI"), is provided for informational purposes only. Participants
should refer to the plan agreement for more complete information.
General
The Plan is a defined contribution plan established effective January 1,
1994 under the provisions of Section 401(a) of the Internal Revenue Code
("IRC") covering all nonunion management employees of the Company who have
attained the age of 20.5 and have at least six months of service.
Contributions
Participants may elect to contribute between 1% and 10% of before-tax
compensation, as defined in the Plan, subject to certain limitations under
the IRC. Matching contributions are made by the Company in an amount equal
to 50% of the participant's contribution, up to the lesser of 4% of the
participant's annual compensation or $500 in a plan year. Additional
discretionary amounts, as determined by the board of directors of NSI, may
be contributed by the Company and are allocated to participants at the
discretion of the Company. Effective January 1, 1996, the maximum matching
contribution for a plan year is $1,000.
Vesting
Participants are always fully vested in their individual contributions.
Vesting of employer contributions occurs on an increasing scale ranging
from 10% vesting after two years of service, as defined, to 100% vesting
after seven years of service. Nonvested employer contributions are
forfeited upon withdrawal or termination, as defined, from the Plan and are
used to reduce future employer contributions.
Administration
Under a trust agreement dated September 1, 1993, as amended, Wachovia Bank
of Georgia, N.A. was appointed trustee of the NSI DC Trust.
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All administrative expenses of the Plan were paid by the Company during
1995.
Participants' Accounts
Individual accounts are maintained for each of the Plan's participants to
reflect the particular participant's contributions and related employer
contributions, as well as the participant's share of the Plan's income and
any related administrative expenses.
Effective with the change in 1995 from monthly to daily valuation of
participant accounts, the Plan assigns units to its participants. At
December 31, 1995, 277,569 units were assigned to plan participants. Unit
values for each investment fund were as follows at December 31, 1995:
Stable Value Fund $10.59
Diversified Equity Fund 10.57
Balanced Fund 22.95
NSI Stock Fund 12.39
International Fund 4.59
Investment in NSI DC Trust
The Plan's assets are commingled in the NSI DC Trust together with the
assets of certain defined contribution plans of other NSI divisions. The
investments of the NSI DC Trust are subject to certain administrative
guidelines and limitations as to type and amount of securities held.
Certain fund assets are allocated to selected independent investment
managers to invest under these general guidelines.
Investment Options
The separate investment options made available under the Plan may be
changed, eliminated, or modified from time to time by the investment
committee of the NSI DC Trust. Participants make their investment elections
in 5% increments, with changes allowed on a daily basis. Participants may
not direct the investment of company matching or profit-sharing
contributions. These are invested in the NSI Stock Fund discussed below.
The separate investment options offered by the Plan are:
* Diversified Equity Fund. This fund is a diversified stock fund
designed to invest in a broad range of common stocks providing
capital growth.
* Stable Value Fund. This is a fixed income fund designed to provide a
steady level of current income while focusing on preservation of
principal.
* Balanced Fund. This fund is invested in a changing mix of
high-quality stocks and bonds. The fund is designed to provide
capital growth and current income while limiting the risk of
principal loss.
* NSI Stock Fund. This fund is invested in NSI common stock, although
it may hold other short-term investments from time to time. A
participant may not direct more than 50% of his/her account balance
to be invested in this fund.
* International Fund. This fund is invested in the stock of non-U.S.
companies and is designed to provide long-term growth.
Loans to Participants
The Plan permits loans to participants up to the lower of 50% of the
participant's vested account balance or $50,000. Participants have up to
five years to pay back the principal and interest unless the loan is for
the purchase of a primary residence, in which case the repayment period
will be established at the time the loan is approved. Loan processing fees
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are charged directly to the participant's account. Interest rates are
determined by the plan administrator based on prevailing market rates.
Benefits
A participant is entitled to receive the distribution of his/her vested
account balance upon death, disability, or retirement (age 65). These
benefits are payable in a lump-sum amount or in installments at the
participant's election if he/she is age 55 or older and his/her vested
balance is greater than $3,500. A participant who terminated employment
with the Company for other than these reasons is entitled to receive
his/her contributions in a lump sum as soon as administratively feasible.
Benefits are payable in cash, except that any portion of a participant's
account balance which is invested in the NSI Stock Fund is distributed in
the form of shares of NSI common stock, with fractional shares paid in
cash. If the number of shares held by a participant is less than 100, then
the participant may elect to receive cash instead of shares as his/her
distribution.
Hardship withdrawals may be made upon proven financial hardship of a
participant as defined in the plan agreement and approved by the Plan's
retirement committee.
Plan Termination
Although the Company intends for the Plan to be permanent, the Plan
provides that the Company has the right to discontinue contributions or to
terminate the Plan at any time. In the event of Plan termination, each
participant shall be vested in the balance of his account and his
proportionate share of any future adjustments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accounts of the Plan are maintained by the trustee on the cash basis of
accounting. The accompanying financial statements have been prepared using
the accrual method of accounting by application of memorandum entries. The
preparation of the financial statements in conformity with generally
accepted accounting principles requires the Plan's management to use
estimates and assumptions that affect the accompanying financial statements
and disclosures. Actual results could differ from these estimates.
Investment Valuation
Investments of the NSI DC Trust, except for the guaranteed investment
contracts ("GICs"), are stated at fair value as determined by the trustee
from quoted market prices. Securities traded on a national exchange are
valued at the last reported sales price on the last business day of the
plan year; investments traded in the over-the-counter market and listed
securities for which no sale was reported on the last day of the plan year
are valued at the last reported bid price.
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GICs included in the master trust are fully benefit-responsive and are
therefore carried at contract value (cost plus accrued interest) in the
accompanying financial statements in accordance with Statement of Position
94-4. At December 31, 1995, contract value approximates fair value. At
December 31, 1995, the weighted average crediting interest rate was 6.77%.
For the year ended December 31, 1995, the annual yield on the GICS held by
the NSI DC Trust was 6.9%. For certain contracts held by the trust,
crediting interest rates may be changed in the event of certain events such
as early retirements, plant closings, etc., but in no case are adjusted to
a rate less than 0%.
GICs are subject to credit risk based on the ability of the insurance
company to meet interest or principal payments, or both, as they become
due.
3. NSI DC TRUST
Investment Income
Investment income of the NSI DC Trust for the year ended December 31, 1995
is summarized as follows:
Dividends on common stock ................................... $ 245,288
Interest income ............................................. 4,597,435
Net appreciation in fair value of common stock .............. 1,408,275
Net income from mutual fund ................................. 11,982,057
Net income from common/collective trust ..................... 10,492,727
Net income from pooled separate account ..................... 21,986
Investment expenses ......................................... (274,795)
Net investment income ....................................... $ 28,472,973
The investment income of the NSI DC Trust for the year ended December 31,
1995 is allocated among participating plans as follows:
National Linen Service Retirement and 401(k) Plan for Eligible
Management Associates ........................................ $ 515,518
All other NSI plans .............................................. 27,957,455
Total .............................................. $28,472,973
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Net Assets
Net assets of the NSI DC Trust are as follows at December 31, 1995 and
1994:
1995 1994
Mutual fund ................................ $ 47,636,487 $ 32,108,552
Common/collective trust .................... 48,146,903 34,036,863
Guaranteed investment contracts ............ 55,129,605 52,672,980
Loans receivable from participants ......... 6,104,302 5,145,365
NSI common stock ........................... 7,637,554 4,925,868
Money market fund .......................... 1,377,443 3,343,227
Pooled separate account .................... 871,467 0
166,903,761 132,232,855
Cash ....................................... 127,031 0
167,030,792 132,232,855
Accrued investment income .................. 76,779 74,167
Adjustments for pending trades ............. (211,964) (149,089)
Other ...................................... 49,961 7,738
Net assets ................... $ 166,945,568 $ 132,165,671
The allocation of the net assets of the NSI DC Trust to participating plans
is based on participant balances and is as follows as of December 31, 1995
and 1994:
1995 1994
National Linen Service Retirement and 401(k)
Plan for Eligible Management
Associates .................................. $ 3,103,744 $ 1,127,464
All other plans ................................. 163,841,824 131,038,207
Total ................................. $166,945,568 $132,165,671
Investment in NSI Common Stock
As of December 31, 1995 and 1994, approximately 4.6% and 3.7%,
respectively, of the NSI DC Trust's net assets were invested in the common
stock of NSI, a party in interest to the Plan.
4. TAX STATUS
The Plan has filed for, but has not yet received, a determination letter
from the Internal Revenue Service. However, the plan administrator believes
that the Plan is currently designed and is being operated in compliance
with the applicable requirements of the IRC. Therefore, the plan
administrator
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believes that the Plan was qualified and that the related trust was
tax-exempt as of December 31, 1995 and 1994.